Wild Ride on Wall Street: Dow Falls Below 12,000 Then Rallies

U.S. stocks rebounded Wednesday as hard-hit financial shares recovered on the view that fears of the subprime mortgage problem spreading were overblown and had left stocks looking cheap.

The Dow Jones industrial average was up 57.44 points, or 0.48 percent, to end at 12,133.40. The Standard & Poor's 500 Index finished up 9.22 points, or 0.67 percent, at 1,387.17. The Nasdaq Composite Index ended up 21.17 points, or 0.90 percent, at 2,371.74.

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A rise in oil prices led to broad gains among energy shares, sending Exxon Mobil Corp. (XOM) up 1.6 percent. That helped benchmark indexes bounce back from steep early losses in a session typical of the market's recent volatility.

Most notable were resurgent mortgage lenders, investment banks and home builders, the sectors hit the hardest in the previous session's sell-off, the second worst of the year.

"The mortgage lenders, home builders and related financials are getting a rebound from yesterday's carnage," said Rick Campagna, a portfolio manager with Provident Investment Council in Pasadena, California. "It's a relief rally within the ongoing correction."

Indexes fell sharply around midday, taking the Dow briefly below 12,000. The Dow and S&P 500 each were down more than 1 percent before rebounding.

Traders said quarterly expiration and settlement of March futures and options contracts on Friday — known as quadruple witching — added to volatility. Investors typically spruce up portfolios or exercise derivative positions during the period.

Shares of top mortgage lender Countrywide Financial Corp (CFC) rose 2.7 percent, or 90 cents, to $34.39, retracing a 4.7 percent drop a day earlier while shares of investment bank and No. 1 mortgage bond underwriter Bear Stearns Cos. (BSC) were up 1.6 percent, or $2.32, at $145.29 on the heels of a 6.7 percent sell-off on Tuesday.

Meanwhile, shares of home builder Toll Brothers (TOL) ended 3.6 percent, or 99 cents, higher at $28.33, rebounding from a 7.3 percent drop in the last three trading sessions.

Shares of Lehman Brothers Holdings Inc. (LEH), however, fell 0.4 percent, or 28 cents, to $71.72 after the investment bank announced record quarterly earnings but said the results were partially offset by weakness in the U.S. residential mortgage sector.

Stocks dropped 2 percent on Tuesday after a bankers' group reported the proportion of mortgages in the initial stages of foreclosure rose to a record. Investors fear the problems of lenders who make subprime loans to people with weak credit are spreading to mainstream financial firms.

Shares of Qualcomm Inc. (QCOM) rose 3.3 percent, or $1.38, to $43.21 and were among the top supports for the S&P and Nasdaq after JPMorgan Securities upgraded the stock, saying the business fundamentals for the chip developer are improving. .

Exxon gained 1.6 percent, or $1.11, to $71.02, while ConocoPhillips gained 2 percent, or $1.32, to $67.91. Oil prices rose 23 cents to settle at $58.16 after a U.S. government report showed the seventh consecutive decline in gasoline stockpiles leading into the summer driving season.

H&R Block Inc. (HRB), the largest U.S. income tax preparer, rose 0.5 percent, or 9 cents, to $20.14, even though it said it expects to delay filing its quarterly results with regulators and that estimated losses related to its subprime lending unit were $29 million higher than previously estimated.

Trading was moderate to heavy, with about 2.08 billion shares changing hands on the New York Stock Exchange, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 2.29 billion shares traded, above last year's daily average of 2.02 billion.

Advancing stocks outnumbered declining ones by a ratio of about 20 to 13 on the NYSE and by 16 to 13 on Nasdaq.

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